Former Biden Advisor Thinks the US CBDC Would ‘Crowd Out’ Crypto

Cryptocurrencies’ inception brought the unique way of transactions and trade over the blockchain technology. The growing demand is directed towards the central bank digital currency or CBDC—serving the similar unprecedented features with government’s trust. The United States is also seeking the possibilities within the technology ensuring no credits to cryptocurrencies. Recent statement from a former top advisor at the US President administration about the US digital dollar draws something similar. 

Former Deputy National Security Advisor for International Economics in the US President Joe Biden’s administration, Daleep Singh, was speaking at a Senate Banking Committee hearing on Tuesday, February 28, 2023. He claimed cryptocurrencies get used for ransomware activities and many use them to evade sanctions. 

While explaining the potential of CBDC, Singh stated the broader cryptocurrency space would get ‘crowd out’ after the creation of the United States’ CBDC. He also expected this to result in safeguarding national security in the country. 

Crowding out is primarily an economic term which explains reduction in investments and consumption of private entities in the wake of government’s investments. This process eventually results in shrinking of employment rate and a downturn in economic growth. However, crowding out of cryptocurrencies due to CBDCs emergence is considered in national interest given specific reasons. 

Cryptocurrencies facilitate cross-border transactions with utmost security and speed in relatively cheaper transaction fees. This gives the nascent crypto industry an edge over the existing financial system in terms of speed and fees, especially during international transactions. After the launch of central bank digital currencies, this is anticipated to get changed. 

Though many countries around the globe are keenly seeking their own digital currencies, the United States is still within the list of nations still researching the technology. It was reported in December 2022 that the US Federal Reserve made a development in the direction of CBDC development. 

The New York Fed explained in the released white paper of the project dubbed Project Cedar about competition of its first stage of testing. In addition, it was also clarified following the test that the blockchain underlying the project could process the international transaction faster and securely. 

A New York Federal Reserve’s senior official disclosed the insight during the Singapore FinTech Festival in November last year. The official said that the New York Fed was working behind developing a ‘wholesale’ CBDC primarily focusing on bank-to-bank transfers. 

Following the update on digital dollar development, the US joined the race eventually. According to an IMF report released in September last year, almost 100 central bank digital currencies were in either research or development stage by July 2022. By the time there were two CBDCs—Nigerian eNaira and the Bahamian sand dollar— launched completely.

The development of CBDCs picked up pace in the last couple years across the countries worldwide. Until 2020, only 35 countries were considering a CBDC which now rose to reach up to 114 countries, almost three times since then. 

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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